NVIDIA CEO exceedingly positive on ATI, AMD merger news

On hearing the news that AMD is gobbling up ATI, NVIDIA's CEO said that it's great news for his own company. "I thought it was just impossible to get a gift like this," said Jen-Hsun Huang. "ATI is basically throwing in the towel, leaving us as the only stand-alone (graphics chip) company in the world."

The article speculates that Mr. Huang is expecting the merger process to hurt both of the constituent companies, putting a crimp in ATI's ability to churn out new and improved graphics chips in a timely manner. The value of being the last independent graphics specialist standing may be questionable, however. Once you've polished and framed the medal for outstanding endurance, you still have to contend with competition that has gained significant financial backing, as well as greater access to AMD's patent portfolio and intellectual assets.

Other concerns about the AMD/ATI deal include the combined company's new debt load, as AMD is borrowing $2.5 billion to complete the buyout. It's a decent chunk of change, to be sure, but AMD is used to paying back its loans. Over the last two years, the company has eliminated $1 billion of long-term debt, while running its business on razor-thin margins. The current price war with Intel has put the brakes the expanding margins right now, but it helps that sales are growing quickly, and ATI will only add to that haul—to the tune of $2.5 billion. Tighter platform integration should mean stronger pricing power in the long run, and overall, the end result looks like a company in better financial health than either of its component parts.

NVIDIA may indeed benefit from this merger in the short term, and it's very important for ATI and AMD to complete the transition as quickly and as painlessly as possible. But in the long-term perspective, it looks like Jen-Hsun is simply putting on a brave face for the crowd. He'll have to work more closely together with Intel now, and NVIDIA has traditionally been a strong supplier of chipsets for AMD platforms. AMD has said that it wants to keep NVIDIA as a platform partner, and that it welcomes competition with its new division. It remains to be seen whether NVIDIA is comfortable with such a tenuous partnership, or if it prefers to hitch its wagon exclusively to Intel.